Americas Brief newsletter: 23-29 January 2019

This week's Americas Brief newsletter analyses U.S. sanctions on Venezuela's state oil firm, the dam collapse in Brumadinho, Brazil, and industrial action in Chile, among other developments.

United States & Canada

  • Canada - Winter storm leads to severe travel disruption in Toronto
  • United States - Four held over alleged plot to attack Muslim community
  • United States - Partial government shutdown ended as funding bill signed

Mexico, Central America & Caribbean

  • Mexico - Rail company warns of food shortages over blockade
  • Montserrat - U.K. warns of dengue fever risk on Caribbean island
  • Trinidad & Tobago - Authorities enhance security at border posts

South America

  • Brazil - Government to privatise section of key Amazonian highway
  • Brazil - Authorities investigate mining company's response to dam collapse
  • Chile - Strike likely at northern copper mine after workers reject pay deal
  • Venezuela & United States  Washington sanctions state energy company

United States & Canada

Canada airport arrival

Canada ' Winter storm leads to severe travel disruption in Toronto

CANADA ' Natural hazard risk: Elevated

29 January: There is ongoing residual flight disruption at Toronto Pearson International Airport (YYZ) and Billy Bishop Toronto City Airport (YTZ) after a winter storm brought between 15-25cm of snow to the Greater Toronto Area yesterday (28 January). At YYZ, the snowfall prompted the cancellation of approximately 200 outbound flights, while a similar number of inbound flights were also cancelled.

In a statement yesterday, YYZ warned that delays and cancellations are possible into this morning (29 January), likely due to residual disruption to aircraft schedules and reduced runway capacity. The storm is set to pass through Toronto this morning, however temperatures of up to -20 degrees Celsius will prompt extended travel disruption and hazardous, icy driving conditions until tomorrow (30 January) at least.

Why it matters: Business travellers with flights to or from Toronto should re-confirm their flight status prior to departing to their airport. Allow additional time for travel to and from YYZ and YTZ due to icy roads and dangerous driving conditions. Drivers should reduce speed, increase the distance between themselves and the vehicle ahead, and ensure that vehicles have emergency supplies, including an ice scraper, a small shovel, non-perishable food and bottles of water.

United States ' Four held over alleged plot to attack Muslim community

UNITED STATES ' Terrorism risk: Minor

22 January: Police arrested three men and a 16-year-old boy in the town of Greece, in New York state, on suspicion of planning a 'potentially lethal' attack on the Muslim community of Islamberg, also in New York state. Police claim that the suspects had made improvised explosive devices (IEDs) containing projectiles such as nails. Three IEDs were discovered at the home of the minor, and 23 firearms were found at other locations, said police. The three men have been charged with criminal possession of a weapon and conspiracy while the 16-year-old also faces charges. The three men are expected to appear in court on 5 February. Police said they could still face federal charges, including terrorism.

Why it matters: Hate crimes targeting members of the Muslim community in the U.S. increased by 15 per cent in 2017, according to figures from the Council on American-Islamic Relations advocacy group. It recorded 300 incidents ' including assaults and arson attacks ' up from 260 in 2016. A2 Global assesses that the polarising presidency of Donald Trump has worsened this problem. Security staff responsible for client sites near Islamic cultural centres and mosques, which face a higher risk of being targeted in hate crime attacks, should factor the growing threat into risk management plans.

United States ' Partial government shutdown ended as funding bill signed

UNITED STATES ' Political risk: Low

28 January: President Donald Trump signed a bill to fund the federal government for three weeks on 25 January, ending the 35-day government shutdown, the longest in U.S. history. The bill, which funds the government until 15 February, contains no new money for a U.S.-Mexico border wall, which was a key demand of the president.

Why it matters: While the re-opening of the government allows for the restart of non-essential operations at key departments and approximately 800,000 federal workers to receive backlogged pay, there is a high likelihood of a further shutdown if the two main parties ' the incumbent Republican Party and the opposition Democratic Party, which controls the lower house ' cannot reach an agreement on border security funding before 15 February. This is a highly likely outcome given Trump's insistence on allocating USD5.7 billion for border security in any budget, which the Democrats strongly oppose. A2 Global advises firms with operations in the U.S. to adjust operational planning to reflect the government's re-opening. Staff should monitor updates on budget negotiations in the three-week outlook and prepare contingency planning in case the government is shut down again in mid-February.

Mexico, Central America & Caribbean

Mexican flag

Mexico ' Rail company warns of food shortages over blockade

MEXICO ' Travel risk: High

29 January: The country is set to face staple food shortages within days due to striking teachers blockading rail tracks, railway operator Ferrocarril Mexicano (Ferromex) warned on 28 January. Teachers from the National Coordination of Education Workers (CNTE) union have been blocking railway lines in the western state of Michoac'n since 14 January, in protest over labour demands. This has impacted product distribution in several sectors, and according to Ferromex, part of the transportation division of mining company Grupo Mexico, and U.S. headquartered Kansas City Southern, is leading to a shortage of staples wheat flour and corn.

Why it matters: According to railway companies and shipping agents, the dispute has resulted in 252 trains being unable to transport 2.1 million tons of products, leaving 10,500 containers stranded at the Pacific ports of L'zaro C'rdenas, in Michoac'n, and Manzanillo, in the state of Colima. Losses incurred total MXN1.4 billion pesos (USD736 million), according to the Confederation of Industrial Chambers of Mexico. Ferromax said steelmakers and the automotive industry were also facing shortages of materials and would soon have to lay off workers. There has been a spate of teachers' strikes in recent months.

While central government has transferred money to Michoac'n in a bid to meet some CNTE demands, there are no signs of a speedy resolution. Foreign businesses should review logistics chains in the one-week outlook and find alternative routes or sources for materials to circumvent the blockades. A shortage of staple foods ' or severe price hikes ' would likely lead to protests in major cities, such as the capital Mexico City. Companies should review personnel security and factor in this possibility.

Montserrat ' U.K. warns of dengue fever risk on Caribbean island


23 January: The U.K. Foreign and Commonwealth Office updated its travel advice for the British Overseas Territory of Montserrat, warning of cases of mosquito-spread viral infection dengue fever on neighbouring Caribbean islands. On the same day, the Caribbean Public Health Agency (CARPHA) advised countries in the region to implement enhanced measures to reduce mosquito breeding and prevent the spread of the dengue. There have been five suspected deaths from dengue on Jamaica this year, in an outbreak which began in 2018.

Why it matters: The last major outbreak of dengue in the region occurred in 2009, and CARPHA last week predicted another regional outbreak soon. Dengue is a viral infection with symptoms including fever, headache, joint pain and a rash. While mild in most cases, in rare instances it can be life-threatening. Travel companies should advise clients travelling to Montserrat, and other Caribbean islands, of the risk from the virus and suggest preventative measures. These include: using mosquito repellent on exposed skin; wearing neutral coloured, long-sleeved clothes; removing containers of standing water from around dwellings; ensuring door and window screens work properly. Travellers should have comprehensive travel and medical insurance.

Trinidad & Tobago ' Authorities enhance security at border posts

TRINIDAD & TOBAGO ' Travel risk: Elevated

24 January: National Security Minister Stuart Young said that security measures will be enhanced at border posts between the twin island country and its mainland neighbour, Venezuela. This comes, after Venezuelan opposition leader Juan Guaid', the president of the Venezuelan national assembly ' the unicameral legislature ' declared himself 'acting president', saying he had replaced de facto president Nicol's Maduro.

Why it matters: The decision to increase security at the border comes in anticipation of increased refugee flows from Venezuela. The measures are likely to also hamper other logistics operations, including clearance at ports, in the two-week outlook or until the current wave of unrest in Venezuela passes. As opposed to several Western countries, which were quick to recognise Guaid' as legitimate leader, Trinidad & Tobago continues to recognise Maduro as Venezuela's president.

South America

Trans-Amazonian highway

Brazil ' Government to privatise section of key Amazonian highway

BRAZIL ' Political risk: Medium

22 January: The government announced that a section of the 4,000km long Trans-Amazonian Highway, or BR-230, is to be added to a priority list for privatisation. A concession will be issued for a 40km section of the road in the northern state of Par', which will be packaged together with a major section of the north-south BR-163 route, a key shipping route for grains. On 21 January, government secretary Adalberto Vasconcelos announced that the government is seeking to privatise more airports and attract new investment for railways.

Why it matters: While Brazil is a major commodity exporter, its ability to compete internationally is hampered by substandard transport infrastructure, particularly its road network. The privatisations announced this week seek to attract much-needed investment in the area, and are likely to facilitate the export of grain. There is a moderate risk that environmentalist groups will protest against the privatisations and road developments, as the Trans-Amazonian Highway has been blamed for facilitating deforestation. A2 Global advises construction and commodity-producing firms in Brazil to factor the privatisations into strategic planning and assess the commercial opportunities they present.

Brazil ' Authorities investigate mining company's response to dam collapse

BRAZIL ' Political risk: Medium

28 January: The Brazilian Securities and Exchange Commission (CVM), the securities market authority, initiated a probe into Brazilian-owned mining company Vale S.A. This will investigate Vale's response to the collapse of a dam at its C'rrego do Feij'o mining complex in Brumadinho, in the south-eastern state of Minas Gerias, on 25 January resulting in the death of 65 people. According to local newspaper Valor Econ'mico, the dam burst at 1300 local time on Friday, while Vale's first notification to the CVM was two and a half hours later. On 27 January the state prosecutor's office of Minas Gerais confirmed that the state court has frozen BRL5 billion (USD1.3 billion) of Vale's assets to finance recovery efforts and compensate damages resulting from the dam collapse.

Why it matters: Vale has suffered from the fallout associated with the dam collapse, with its share price dropping by almost 20 per cent yesterday. A2 Global advises firms that partner with Vale to assess the business impact of the new probe and the potential fallout if the company is found to be negligent or unresponsive.

Chile ' Strike likely at northern copper mine after workers reject pay deal

CHILE ' Political risk: Minor

22 January: Mine supervisors at the Gabriela Mistral copper mine in the northern Antofagasta region voted to go on strike. This comes after the union of mine supervisors rejected a final pay offer put forward by Codelco ' the state mining company which owns the mine, according to reports from the Reuters news agency. The union said that Codelco's offer failed to satisfy demands for a signing bonus. On 26 January, striking workers protested outside the entrance to the mine, however Codelco stated that it did not impact mining operations.

Why it matters: While Chilean labour law requires that the two parties enter into five days of government mediation in an effort to resolve the dispute, a strike is now the most likely outcome. If it does go ahead, a strike is likely to begin the week commencing Monday 4 February. Firms which source copper from the Gabriela Mistral mine or partner with it should factor likely industrial action into operational planning. Management should review and prepare to implement contingency plans.

Venezuela & United States ' Washington sanctions state energy company

VENEZUELA ' Political risk: Extreme

UNITED STATES ' Political risk: Low

29 January: The U.S. government has introduced sanctions against PDVSA, Venezuela's state-owned oil company, in a bid to increase pressure on President Nicol's Maduro to step down, following large-scale anti-government protests last week. According to U.S. treasury secretary Steve Mnuchin, any purchases of oil from Venezuela by U.S. entities would flow into a 'blocked account'. In retaliation, PDVSA has reportedly ordered customers with vessels waiting to load crude destined for the U.S. to prepay for cargoes before departure.

In a separate but related development, Juan Guaid' ' the leader of the opposition-controlled national assembly who declared himself acting president last week ' has called on supporters to stage further protests against Maduro tomorrow (30 January) and 2 February.

Why it matters: Venezuela's economy is heavily reliant on oil exports and the U.S. decision to introduce sanctions on PDVSA marks a further deterioration in bilateral relations. The sanctions are likely to threaten revenues generated by the oil industry as Venezuelan crude supplies to the U.S. amount to roughly 41 per cent of its oil exports. The decision will impact U.S. businesses with refining operations that currently rely on imports of Venezuelan oil ' including the Chevron Corporation and Valero Energy Corporation. A2 Global advises businesses whose operations will be impacted by the PDVSA sanctions to seek alternative crude oil suppliers and adjust supply chains accordingly.

A2 Global advises businesses travellers in the capital Caracas to exercise additional vigilance in the one-week outlook and immediately leave the area if they come across any anti-government protests as a precaution. The areas around the Cotiza area of the capital, and Plaza Alfredo Sadel, a public square, are likely flashpoints for protests. The situation across the country will remain tense, with a high likelihood of violent confrontations between police and demonstrators during the upcoming protests.